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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In re Applications of ) ) KIXK, Inc., Assignor ) File No. BALH-961217GJ ) and ) ) Gulfstar Communications Arkansas) Licensee, Inc., Assignee ) ) and ) ) Gulfstar Communications Arkansas) File No. BALH-961217GI Licensee, Inc., Assignor ) ) and ) ) Noalmark Broadcasting Corporation, Assignee) ) For Assignment of License of ) KBYB(FM), El Dorado, Arkansas ) MEMORANDUM OPINION AND ORDER Adopted: July 15, 1998 Released: August 14, 1998 By the Commission: Commissioners Ness and Tristani concurring and issuing a joint statement 1. The Commission has before it an Application for Review filed by El Dorado Broadcasting ("EDB"), licensee of two radio stations in El Dorado, Arkansas, which challenges a July 22, 1997 staff decision concerning the sale of FM radio station KBYB in El Dorado. The action at issue approved, over EDB's objection, the assignment of KBYB's license to Noalmark Broadcasting Corporation ("Noalmark"). EDB argues that Noalmark will dominate the local radio market and create a radio monopoly by driving EDB's stations out of business. We find that EDB has neither supported its arguments nor demonstrated any staff error, and accordingly shall deny the Application for Review. Discussion 2. The Commission's rules limit the number of broadcast stations that any one broadcaster can control in a single "market." The relevant radio market for purposes of numerical local ownership limits is defined as the area encompassed by the principal community contours (i.e., predicted or measured 5 mV/m for AM stations and predicted 3.16 mV/m for FM stations) of the mutually overlapping stations proposing to have common ownership. Radio Broadcast Ownership, 11 FCC Rcd 12368 (1996). See 47 C.F.R.  73.3555(a)(4)(ii). As the number of stations within a market increases, so do the number of stations that any one entity can own in that market. In determining how many stations are in a market, we count all operating full power commercial stations whose principal community contours intersect those of the mutually overlapping stations in the proposed combination. Radio Broadcast Ownership, 11 FCC Rcd 12368, 12370 (1996). In markets like the present one, containing 15 commercial radio stations, one party can control up to six stations, with no more than four in the same service. 47 C.F.R.  73.3555(a)(1)(iii). 3. It is undisputed that Noalmark's ownership of KBYB(FM) in addition to its existing interests in three other local stations (2 FM and 1 AM), is numerically permissible under our rules for 15-station markets. At issue is whether the transaction would nevertheless be contrary to the public interest, and should be viewed under a different market definition. EDB argues that our rules misidentify the size of the relevant market as applied to the present case, thereby inadequately protecting competition in El Dorado, and resulting in a conflict between our rules and federal antitrust law. According to EDB, Union County, Arkansas is the relevant market for purposes of this transaction, rather than the larger area formed by the overlapping service contours of the commonly owned stations. EDB's approach excludes nine stations that would be counted under our rules, and credits the market with only six radio stations: two of which are licensed to EDB, three of which are licensed to Noalmark, and one of which (KBYB) Noalmark is seeking to acquire here. In a six- station market, there can be common ownership of no more than three stations. See 47 C.F.R.  73.3555(a)(1)(iv). The staff declined to consider the KBYB market as containing fewer than 15 stations, rejecting EDB's arguments as unsupported. The staff also noted that the Antitrust Division of the U.S. Department of Justice, to which EDB also submitted its arguments, declined to pursue this matter from an antitrust perspective. 4. On review, EDB makes essentially the same arguments without providing any further documentation. It argues that the staff should have accepted its argument that Union County is the appropriate market, based on (1) its own statement that signals from distant cities do not sufficiently penetrate Union County (the largest county in Arkansas) to receive any significant audience share; and (2) its own belief that salespeople from radio stations outside the county do not make any significant effort to sell radio time within the county. EDB did not present any data or other tangible support to back up these opinions, either to the staff or to us. Thus, we find no reason to depart from our established standards for determining the relevant radio market and the number of stations counted as being in that market, for purposes of the local numerical radio ownership rules, and we find that the current application is consistent with those established standards. We note, in any event, that we recently sought comment on our current methodology for determining a "radio market" and that any proposed change to that methodology is, in our view, most appropriately considered in the context of that proceeding. See Notice of Inquiry, In the Matter of 1998 Biennial Regulatory Review -- Review of the Commission's Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, MM Docket No. 98-35, 13 FCC Rcd 11276, 11283 (1998). 5. Likewise, we find no support for EDB's argument that the transaction at issue is anticompetitive and contrary to the public interest. EDB maintains that, with KBYB, Noalmark's four stations would have "nearly 80% of the audience and more than 80% of the revenues from radio broadcasting in Union County." It also argues that Noalmark has not denied EDB's earlier contention that Noalmark might offer free advertising on two of its stations as a bonus to businesses that advertise on its other two stations. In considering issues of radio concentration pursuant to a public interest analysis, the Commission generally looks at the advertising revenue share of the proposed combination in the Arbitron radio metro market, as reported in the BIA Master Access Database. Here, the stations are not located in an Arbitron radio metro market and, thus revenue information is unavailable to us independently. Although a petitioner may be able to demonstrate that a particular geographical area, such as a county or group of contiguous counties, constitutes a functional equivalent of an Arbitron radio metro market, EDB's allegations are insufficient to make such a showing with respect to Union County. Further, even had EDB shown Union County to be a functional equivalent to an Arbitron radio metro market for purposes of our competition and diversity analysis, EDB provides us with no data for the area. Its statements concerning competition are purely speculative and unsupported by extrinsic evidence. For example, EDB does not explain how it derives its 80% revenue share figure, and provides no data in support of that figure. As the staff indicated, it was unable to independently verify EDB's figures in recognized sources of reference. On review, EDB presents its previous arguments again, without explaining why it could not support those arguments to the staff and without providing any further support or documentation. See generally 47 C.F.R.  1.115 (a), (c), and (j). In the absence of a verifiable basis for EDB's arguments, we affirm the staff's decision and reject EDB's arguments. 6. Accordingly, IT IS ORDERED that the Application for Review filed by El Dorado Broadcasting Company IS DENIED, and that its Emergency Motion for Stay IS DISMISSED as moot. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary JOINT STATEMENT OF COMMISSIONERS SUSAN NESS AND GLORIA TRISTANI Station KBYB(FM), El Dorado, Arkansas File Nos. BALH-961217GH and GI In the Telecommunications Act of 1996, Congress significantly relaxed the Commission- established caps on local radio ownership. The Commission has faithfully executed that directive and will continue to do so. However, Congress also set clear limits on the level of permissible consolidation, such as the prohibition on any entity owning or controlling more than fifty percent of the radio stations in smaller markets. See 1996 Act, Section 202(b)(1)(D). Unfortunately, we believe that our current rules for defining radio markets hamper our ability to fulfill Congress' mandate. Under our rules, for instance, it is entirely possible that one entity could own all of the radio stations that serve a particular community. As the item notes, the issue of market definition has been raised in our biennial ownership proceeding and we look forward to addressing it there. For the time being, this case properly applies our rules as they exist and we therefore accept the result. Our current broadcast ownership rules stumble on one of the critical steps in any meaningful competitive analysis: a clear definition of the scope of the "market" in question. For purposes of counting the number of stations in the "market," the rules count any station whose principal community contour intersects with any mutually overlapping station in the proposed combination. But then when counting the number of stations a particular entity may own within that market, the "market" is limited to only those stations that overlap with every station proposing to have common ownership. The end result is that there can be no meaningful assessment of market concentration because there is no consistent definition of the relevant market. In this case, for instance, the Commission has found that Noalmark will own four stations in a 15-station market, well within the six stations permitted. But this comparison is apples to oranges: the four stations that count against Noalmark are only those that overlap with every other station in the proposed combination; the other 11 stations that make up the total market by overlapping with at least one of the four stations are ignored regardless of who owns them. Conceivably, Noalmark could own several of those stations as well (and thus violate the six station limit), but because those 11 do not overlap with every other Noalmark station in the proposed combination, our rules disregard them. It is also clear that our practice of treating any station whose principal community contour intersects with any mutually overlapping station in the proposed combination as part of the same "market" can lead to unrealistic results. In one case, for instance, two 50 kW Class A AM stations, licensed to Memphis, Tennessee, with principal community contours that overlapped the principal community contour of one of the stations in a proposed radio combination in Jonesboro, Arkansas -- approximately 68 miles away in an entirely different Arbitron market -- were counted for purposes of determining the number of stations in the relevant radio market. See Patteson Brothers, Inc., 8 FCC Rcd 7595 (1993). We do not have any definitive answers at this point, but a logical starting point would be to apply the same market definition both to the number of stations in the market and to the number of stations a particular entity actually owns within that market. Again, we look forward to addressing this market definition issue in the context of our biennial ownership proceeding. In addition to the above market definition issues, this decision is troubling because it offers no guidance as to the type of evidence the Commission will consider in analyzing competition in a market. Published market analysis is available for most, but not all, markets. In this case, the petitioner simply asserted that Noalmark, the assignee, would receive eighty percent of the available advertising revenue in the market if the transaction were approved. We might have found the petitioner's argument more convincing if the petitioner had supplemented this statement with documents upon which such predictions were based, or with verified statements from advertisers and others familiar with advertising shares in the market. Such evidence would be especially important in smaller markets. Approximately half of all radio stations are located outside of Arbitron-rated markets in communities with populations of 50,000 or less. Revenue estimates compiled by organizations such as BIA Research, Inc. are generally not available for the stations in these areas. For the Commission to be able to fulfill its statutory requirement to conclude that a license assignment or transfer is in the public interest (see Section 310(d) of the Communications Act), it is vital that parties provide us with fact-specific information about the effect of the proposed transaction on diversity and competition in the market.